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Wipe our Debt (Photo credit: Images_of_Money)

The Bureau of Consumer Financial Protection (CFPB) believes consumers need greater protections when it comes to medical debt. The federal agency, however, is not quite certain how to go about it.

CFPB has embarked on creating a new set of rules designed to increase protection for consumers and more strictly regulate creditors and collectors, but will these new rules include medical debt?

I asked my colleague, Patrick Lunsford, editor for insideARM.com, which reports on the activities of the accounts receivable management industry (better known as debt collection), for some perspective into CFPB and medical debt. “Healthcare debt is tricky,” Lunsford says.

The CFPB, by law, has limited authority over debt collection by healthcare providers. “Basically, the CFPB doesn't yet know how medical debt will be handled,” Lunsford says. “It's very easy for them to write rules requiring financial institutions to adhere to the Fair Debt Collection Practices Act (FDCPA), because the regulator's purview covers all financial institutions. But medical debt is often classified as a non-financial instrument (non-voluntary, in fact), so CFPB is somewhat stuck on what to do about it.”

Which is not to say CFPB has not authority of medical debt. Once healthcare providers transfer a debt to a third-party such as a collection agency, the CFPB has oversight. “Once the medical debt is bought or assigned, it's treated like any other debt because it's now in the hands of a financial company (a collection agency or debt buyer),” Lunsford explains.

The major reasons behind complaints regarding collection of medical debt included allegations that the collection agency attempted to collect a debt that had been paid, or the amount was incorrect, or the person contacted was not responsible for the debt.

CFPB of late has been making noises about oversight into medical debt. Last week CFPB Director Richard Cordray indicated the CFPB is looking at credit reporting issues relating to medical debts. Back in July, Corey Stone, CFPB Assistant Director, told the Senate Subcommittee on Banking that consumers need greater protections with regard to medical debt, but indicated that such protections will need to come from other regulatory agencies; Congress, of course, can expand the authority of CFPB as well.